New Tech Salvation for Adult

Joe D
Playboy New Frontier Media In an industry that counts on impulse buys and video-on-demand, faster cell-phone Internet access should be a boon for publicly traded adult-entertainment companies, according to a recent report in MSN finance. While share prices and revenues based on more traditional channels are flagging somewhat, analysts are bullish on the future of adult companies.

For example, Playboy Enterprises has seen its share price fall by 30% since the start of 2004, yet it gained 39% in the S&P 500 Index. And a small video distributor in Europe called Private Media trades where it did at the beginning of 2004, while the Russell 2000 Index of small-cap stocks has advanced it more than 45% in the same time frame.

Pay-television revenue overall was up just 1% at New Frontier Media in the first quarter of 2007, but VOD revenue jumped 10%. In the second quarter, overall pay-TV revenue at the company fell 17%, but VOD revenue was up 18% at New Frontier's biggest cable partner, and VOD sales were up at all of its top ten cable partners. At Playboy, revenue weakness at the magazine and in pay-per-view TV has almost been offset by strength in VOD sales.

Playboy, New Frontier Media and other adult-video providers have sold pay-per-view content for years through cable and satellite partners, but the fact that these broadcasts are pre-scheduled has limited their success. VOD is there when the customer wants it.

As New Frontier Media delicately put it in a recent filing, "Instant start times assure that an impulse demand results in a transaction, whereas with pay-per-view, the scheduled start time may not be synchronized to a ‘viewer's requirements.’"

Private Media's chief operating officer, Peter Cohen, said adult entertainment "is particularly an impulse buy. So the on-demand functionality of VOD suits our content very well."

But there's more.

VOD offers other distinct advantages for adult-entertainment providers. VOD broadcasts can't be copied, so piracy is reduced. Also, it's easier to track consumer interests and behaviors with VOD.

"You get better and more specific actionable data about what works, and we have been responding to that," Playboy Enterprises Chief Executive Christie Hefner said in a recent conference call.

According to the report, new technology like VOD appears to offer new hope for porn profits. “Innovations such as video-on-demand and faster cell-phone Internet access mean consumers will be better able to get the kind of porn they want, when and where they want it. That should boost sales for the publicly traded adult-entertainment companies supplying these channels.”

By some estimates, pornography accounts for 40% of all Internet traffic and pay-TV sales. But, for shareholders at least, technology has yet to make pornography wildly profitable.

Those in the know see things a bit differently from the short-sighted views of shareholders. New technology seems to promise adult a bright future – as it always has.